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Abstract

A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, whereas under traditional procurement, these tasks are delegated to separate private contractors. The two provision modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. The government agency's preferred mode of provision depends on the information gathering costs, the costs of innovation efforts, and on the degree to which effort is contractible.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41966.

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Date of creation: Oct 2012
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Handle: RePEc:pra:mprapa:41966

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Related research

Keywords: Public-private partnerships; Integration versus separation; Information gathering; Incomplete contracts;

Other versions of this item:

Find related papers by JEL classification:

• D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
• H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
• L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

This paper has been announced in the following NEP Reports:

• NEP-ALL-2012-10-27 (All new papers)
• NEP-CTA-2012-10-27 (Contract Theory & Applications)
• NEP-INO-2012-10-27 (Innovation)
• NEP-PUB-2012-10-27 (Public Finance)

References

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Cited by:

1. Hoppe, Eva I. & Kusterer, David J. & Schmitz, Patrick W., 2013. "Public–private partnerships versus traditional procurement: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 145-166.
   
   • Hoppe, Eva I & Kusterer, David J & Schmitz, Patrick W, 2010. "Public-private partnerships versus traditional procurement: An experimental investigation," CEPR Discussion Papers 8167, C.E.P.R. Discussion Papers.
   • Eva I. Hoppe & David J. Kusterer & Patrick W. Schmitz, 2011. "Public-private partnerships versus traditional procurement: An experimental investigation," Cologne Graduate School Working Paper Series 02-02, Cologne Graduate School in Management, Economics and Social Sciences.
2. Schmitz, Patrick W., 2009. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," CEPR Discussion Papers 7584, C.E.P.R. Discussion Papers.
   
   • Schmitz, Patrick W., 2010. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 807-816, September.
3. Schmitz, Patrick W., 2012. "Job design with conflicting tasks reconsidered," MPRA Paper 36914, University Library of Munich, Germany.
   
   • Schmitz, Patrick W., 2013. "Job design with conflicting tasks reconsidered," European Economic Review, Elsevier, vol. 57(C), pages 108-117.
4. Warwick McKibbin & Timo Henckel, 2010. "The Economics of Infrastructure in a Globalized World: Issues, Lessons and Future Challenges," CAMA Working Papers 2010-39, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
5. Schmitz, Patrick W, 2010. "Should a principal hire one agent or two agents to perform two sequential tasks?," CEPR Discussion Papers 7976, C.E.P.R. Discussion Papers.
6. Takeshi Nishimura, 2012. "Bundling Decision in Procurement Auctions with Risk-Averse Suppliers," Global COE Hi-Stat Discussion Paper Series gd12-237, Institute of Economic Research, Hitotsubashi University.
7. Schmitz, Patrick W., 2010. "On contractual solutions to hold-up problems with quality uncertainty and unobservable investments," MPRA Paper 23157, University Library of Munich, Germany.

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